Ask Paul: Should I withdraw money from super or my term deposit?


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Dear Paul,

I am a self-funded retiree and 61. I have a mortgage on one of my properties ($380,000) and about $60,000 in a super fund (been contributing $5000 a year for the last seven years). Should I withdraw all funds in super and put it in the mortgage?

I have had to discount the rent for the tenants and also I pay land tax. I'm also thinking of selling a unit in Queensland ($250,000) to pay off the mortgage or at least reduce it. I also have $250,000 in a term deposit. - Gabrielle

paul clitheroe

Interesting question Gabrielle. The answer lies in relative returns. I imagine your TD is returning under 1%. Any good super fund will have been averaging around 5% to 8%, depending on the investment option you chose. You will have a good feel for returns on the Queensland unit, but my guess is that your TD is likely to be your most secure, but lowest returning investment.

Personally, super is the last asset I would touch. If you want to reduce or remove debt and keep the security of the TD, I think that takes us to selling a property. Pretty obviously you would go with your worst performing property.

This is a major decision for you. I would suggest you do your research and clearly set out the returns on the assets you hold and take a view on the outlook for them. My view is our economy will recover. If you share that view, would you hang onto your properties? The interest rate on your mortgage will be low.

A fair bit of the right answer will be personal to you, your situation and your attitude to risk. One you have all the facts in front of you, don't hesitate to discuss this with an independent professional, such as your accountant or a professional, fee-charging advisor.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.